Bank Reconciliation Statement--Cash Book (Overdraft) Balance

When credit side of cash book, that is expenditure, is more than debit side we say it overdraft balance of cash book. In the case of reconciliation of statement when there is overdraft balance of cash book, we have to do just the opposite what we did in the case of favorable balance of cash book.

Take an example—“cheque issued but not presented for payment” in the case of favorable balance of cash book, we added it back as our expenditure side is more than pass book and to balance it we have to add it back. Now if i talk about overdraft balance, we need to deduct it (just the opposite) because in overdraft case our expenditure is already more and in that expenditure list there is an item regarding cheque issued, so we have to deduct it. It would implies our overdraft balance is reduced after this reconciliation.

“Bank charges charged by bank but not informed” here if we had favorable balance, we would deduct it but now in case of overdraft balance we have to add it (just the opposite) because we already have our expenditure side more and still there is an item of expenditure which we missed to record so result would be to increase the cash overdraft balance.

If anyone has to fail to understand so far, let us solve a question to understand clearly.

Problems:

1. From the following particulars, ascertain bank balance as would appear in the pass book as on 30.4.15.

i) The bank overdraft (credit balance) as per cash book on 30.04.2015 was rs 8000.

ii) Interest on overdraft for six months amounting to rs 200 was debited in the pass book.

iii)Bank charges also debited in the pass book which amounting to rs 150.

iv) Cheque issued but not presented for payment before 30.04.2015 amounting to rs 1500.

v) Cheque paid into the bank but not cleared and credited before 30.04.2015 were rs 2500.

vi) Interest on govt. Securities collected by the bank and credited in the pass book amounted to rs 1800.

Solution:

	Bank Reconciliation Statement as on 30.04.2015
	Particular	Amount	Amount
i)	Bank overdraft as per cash book		8000
ii) Add:	interest on overdraft not recorded in cash book	200
iii)Add:	Bank charges not recorded in cash book	150
v)Add:	cheques deposited but not cleared within date	2500	2850
			10850
iv)less:	cheques issued but not presented for payment	1500
vi) less:	interest on govt. Securities collected by bank
	but not recorded in cash book	1800	(3300)
	Bank balance as per pass book (overdraft)		7550

Disclosure Statement

murlicoachingcentre.blogspot.in  is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.

My experiences with a product do not represent the experiences of other people or the quality of the product. They only represent my experiences. Remember to always shop around and read product reviews before making any purchase, in order to be a more informed consumer. 

My official disclosure statement:

This policy is valid from November 10, 2015.

This blog is a personal blog written and edited by me. For questions about this blog, please contact murlijoshi33@yahoo.in

This blog accepts forms of cash advertising, paid insertions, or other forms of compensation, as long as they agree with this blog’s MO and my own personal views.

The compensation received will never influence the content, topics or posts made in this blog. All advertising is in the form of advertisements generated by a third party ad network. Those advertisements will be identified as paid advertisements.

The owner of this blog is not compensated to provide opinion on products, services, websites, and various other topics. The views and opinions expressed on this blog are purely the blog owner’s. If I claim or appear to be an expert on a certain topic or product or service area, I will only endorse products or services that I believe, based on my expertise, are worthy of such endorsement. Any product claim, statistic, quote or other representation about a product or service should be verified with the manufacturer or provider.

This blog does not contain any content which might present a conflict of interest.

Solved questions and answers of Bank Reconciliation Statement

1. From the following particulars prepare a Bank Reconciliation Statement as on 31^st Dec 2014

i) Bank balance as per cash book (Dr) Rs 25450

ii) A number of cheques were deposited in the bank, but on 31^st December 2014, a cheque for rs 500 were not credited in the pass book.

iii) several cheques aggregating rs 5000 were issued, but only cheques for rs 4500 were presented to bank for payment.

iv) The bank had directly collected dividend rs 400, interest rs 300 but these were not entered in the cash book.

v) in accordance with instructions, the bank had honored a bill for rs 2000, but debit note was sent to the trader on 2^nd January 2015.

vi) bank charges rs 20 were not entered in the cash book.

Vii) the debit balance for November 2014 was shown short in the cash book by rs 300.

viii) the bank pass book revealed that a cheque of rs 250 received from a person had been dishonored, but no entry passed int he cash book.

Solutions:

	Bank Reconciliation statement as on 31st December 2014
	Particular	Amount	Amount
	Bank balance as per cash book (dr)		25450
Add:	iii) cheques issued but not presented to the bank	500
	iv) dividend, interest collected directly by the bank	700
	vii) debit balance was short in cash book	300	1500
			26950
Less:	ii) cheques deposited but not credited in the pass book	500
	v) bank honored a bill but not recorded in cash book	2000
	vi)bank charges not entered in cash book	20
	viii) cheque dishonored but not recorded in cash book	250	-2770
	Bank balance as per pass book (cr)		24180

2. From the following particulars prepare Bank Reconciliation Statement as on 31^st march 2105

i) bank balance as per cash book (Dr) rs 1420

ii) A cheque of rs 400 was deposited on 24^th march, but the same was returned by the bank on 29^th for which no entry was made in the cash book.

iii) A bill for rs 5020 received from a debtor previously discounted for rs 5000 was dishonored and the bank debited the account of the merchant, but the same was not recorded in the cash book.

iv) Two cheques issued on 27^th march, but not encashed before 5^th April rs 650 and rs 500

v) cheques for rs 400 debited twice in the cash book.

vi) bank charges rs 75 were not passed through cash book.

Vii) dividend of rs 250 collected by the bank on behalf of the merchant but the matter was not recorded in cash book.

Solutions:

	Bank Reconciliation statement as on 31st March 2015
	Particular	Amount	Amount
	Bank balance as per cash book (dr)		1420
Add:	iv) cheques issued but not encashed within date	1150
	vii) dividend collected by bank but not recorded in cash book	250
			1400
			2820
Less:	ii) deposited cheque returned but not recorded in cash book	400
	iii) bill dishonored but not recorded in cash book	5020
	vi)bank charges not entered in cash book	75
	v) cheque debited twice in cash book	400	5895
	Bank balance as per pass book (dr)		-3075

Bank Reconciliation Statement- Favorable Balance

After learning cash book, its time to understand about Bank Reconciliation Statement (BRS). It is a vital concept in Accounting and every student of accounting must have deep understanding about this. so just learn it.

   Before learning this it is advisable to learn about cash book first learn here everything about cash book  

Introduction--        

In our day to day business activities we record the cash and bank transactions in our cash book. By cash and bank transaction, i mean  sold/purchased goods on cash or paid someone in cash or received cash from them but if we paid or received cheques from them or to them it is a bank transactions. Now the thing is that for every bank transaction made by us, we record it in our cash book and correspondingly our bank record those transactions in its pass book which is a book maintained by all banks to record transaction done by their customer through banks.

suppose, we paid rent of our business premises in cheques. Then what will happen? we would record this transaction in the credit side of the bank column of our cash book and our bank would record that in the debit side of its pass book. Here we must note that what is debit for us is credit for our bank and vice versa, so the entry must be opposite in both books.
                         
                                 The concept of bank reconciliation statement occurs when there is a mismatch between the balance showing in our cash book and balance showing in bank's pass book. Now you are thinking how can mismatch occcurs? answer is, it can! Because it is not possible to discuss with our banker, after recording every transaction, whether they have recorded that transaction properly or not.

To explain my concept take it a scenario, our Accounting year closes on 31st march, we issued a cheque to our supplier on 28th march, there may be chances that our supplier has not presented that cheque to the bank for payment withing 31st march or presented after that date say for example 4th April, In that situation, we would record that transaction immediately on 28th march as soon as we issued that cheque  that is 28th march but our bank would record that transaction on the date on which the cheque presented to the bank for payment that is 4th April that is on the date on which money becomes transfer from our bank to the suppliers bank account. Thus it will show the different balance, because of  that transaction, in cash book and pass books on 31st march. And here comes the need to reconcile (adjust) both the balances so we need to prepare bank reconciliation statement.

Formatting-- 

BRS is prepared in the following way:

	Particular	Amount	Amount
	Balance at bank as per cash book		xxx
ADD	i) cheque issued but not yet presented	xxx
	ii) interest allowed by bank	xxx
	iii) dividend collected directly by bank	xxx
	iv) direct payment into bank by customer	xxx	+xx
LESS:	v) cheque deposited but not yet cleared	xxx
	vi) interest charged by bank	xxx
	vii) standing instruction for payment	xxx
	viii) dishonored of cheque	xxx	-xx
	Bank balance as per pass book		xxx

Now let me analyse the above BRS.

The first line is " bank balance as per cash book" it means we are taking cash book balance to adjust it with pass book balance.

i) "cheque issued but not yet presented" it means we have issued cheque to our suppliers but they have not presented that cheque to bank for payment within date. Here we are adding it because as soon as we issued the cheque we must have credited that amount in the bank column of cash book and for this our cash book balance decreased as compare to our pass book balance ( it will be debited when the cheque will be presented for payment) so we need to add the amount to have it equal with pass book balance.

ii) "interest allowed by the bank" it means we have earned some interest on the balance maintained by us in bank but bank might have not informed us or we might have forgot to record it in cash book but in pass book it was recorded as soon as bank allowed it. so our balance on cash book is down but pass book balance is up thus we need to add the amount to have it equal with pass book.

iii)  "dividend collected directly by bank" it means we have a share in stock market as a investment and we dividend was credited directly in our pass book but in cash book we did not record it (the reason may be we forgot or were not informed by bank) here again cash book balance is low as compare to pass book balance therefore we need to add the amount to have our cash book equal with pass book.

iv) "direct payment into bank by customer" it means our customers have paid directly into our bank here also we were not informed about that by the bank or we might have forgotten to record whatever may be the reason  but the consequences for that is our pass book got increases as compare to our cash book. thus we need to add the amount from cash book balance to have it equal with pass book.

v) "cheque deposited but not yet cleared" it means we got cheque and we have it deposited into bank.we have a tendency to record it immediately in the cash book as soon as we deposited cheque. but on the other hand, bank have not got payment from that cheque so it can not record that amount in pass book till it is cleared so pass book has reduced balance as compared to cash book what we need to balance both the book is deduct the amount with cash book balance.

Here one thing should be noted that we must add/less all the amount only with cash book balance as we have started our statement with "bank balance as per cash book"

Had it been "bank balance as per pass book" we would have to do all add/less with pass book balance.


vi) "interest charged by the bank" it means we might have taken loan from bank and bank has charged interest for it. Now bank has immediately debited the amount in pass book but we can not record it until we are informed (or there may be other reason like fraud or misrepresentation of accounting or negligence) whatever may be the reason our cash book balance is more as compared to pass book balance so we need to balance them by reducing cash book balance.

vii) "standing instruction for payment" it means we have given permission to our bank to make payment timely of certain things ( may be like electric bill or gas bill or internet bill) in that situation bank immediately after making payment debit it in pass book but we might have been informed about that after the close of the month therefore, our cash book is more than pass book. To make it balance we need to reduce it with the amount.

viii) "cheque dishonored" it means the cheque which we deposited in our bank has got cancelled or dishonored that is our bank failed to get payment from that cheque. now when we deposited cheque into bank we must have debited this in our cash book but bank could not credit the same in its pass book because of the dishonored cheque so our cash book balance is more than pass book for this amount thus, deduct it to get both the book balance.

After the above adjustment whatever balance will remain must be equal to pass book balance.

We should note one more thing that at the time of recording of cash book we did not have that information about cheques not cleared, standing instruction etc etc given above. that is why our balances with pass book did not matched. 


Q) How do we know our balances have not matched with pass book?

Actually at every month end we bring "bank statement(pass book)" and when we found there is a difference in the balance of both the book we prepare BRS to reconcile the balance and on reconciling we find all the reason of difference.

Q) Is it necessary that we do not have any information regarding any transaction through cheques?

No! we have the information on maximum transaction done through cheques but there are certain cases in which we are not informed or for any reason we failed to get information. only on that situation there will be difference in balance of pass book and cash book and so we need to prepare the BRS.


The above question we just explained is about favorable balance of cash book but what would we do we had overdraft balance of cash book? to find out the answer, just wait for my upcoming post on BRS (overdraft balance)

share forfeiture (part 1)

Friends this is my first video on Accounting regarding share forfeiture. please give your valuable feedback on the comment box below.

Greatest book on investing --Intelligent Investor

Current Liabilities

On doing business, there are some amounts which always remain to be given to the person who supplies us the raw-materials we call them Trade Creditors.  The concept is when we purchase raw-material from suppliers, we don’t make immediate payment instead we demand few days of credit from them, say, 1 month; now the good point is after 1 month we clear their payment but purchase another lot of raw-materials; in this way some amount is always due to be paid to creditors at any point of time in a year. It’s like interest free loan taken from suppliers so it’s indirect gain for us.

Similarly, there are some other short term obligations which we have to pay after the end of an accounting year we call it as ‘short term provisions’ it include proposed dividend, current tax, employee benefits etc.

Apart from that, there are some long term loans which are maturing within 12 months of preparation of Balance Sheet of the current year, we put it in head as ‘Other Current Liabilities’.  

Sometimes, we take Short term Loans to finance our current assets. We call it as ‘short Term Borrowings’.

Here one thing should be noted that it’s not necessary to have all the items in current liabilities there can have only one item or two or all.

If you have any question, please ask in the comment box below.

Current Asset

These are the assets we required to perform the day to day activities of the business. We need to purchase raw-material, apply them in work in progress, and make it finished products to sell it to the debtors. Some raw materials are always lying in our Godown, some raw-materials are always in the process of making- we call it as work-in-progress, some finished products are always in our Godown at any point of time in a year.  The aggregate of Raw-material, work-in-progress, and Finished Goods are called Inventories. Apart from inventory, there are also some amount of money that always remains blocked on the parties to whom we sold our finished goods, we call them as Debtors/Trade Receivables. It is like interest free loan given to customers so it’s our indirect loss to have more amounts in debtors. Some amount of cash and treasury bills, marketable securities are always there in our Bank or with us, we call it as Cash and Cash Equivalents.

Apart from that we sometimes, give short loans to other companies or give advances to our suppliers we put these amounts in the category of Loans and Advances.

And the interest on the above loans and advances are kept under the head ‘other Current Assets’

The aggregates of Inventories, Trade Receivables; Cash and cash equivalents, loans and advances; and Other Current Assets are called Current Assets. These are the assets that can be converted into cash within 12 months.

One thing should be noted that it is not necessary to have all the items in current assets sometimes it may have one items or two or all.

If you have any question regarding this concept, please ask in the comment box below.

What are Contingent Liabilities?

These are the liabilities the obligations of which depend on the occurrence and non occurrence of one or more future events. Means, the liabilities are yet to be finalized. It is waiting for some future events to be happened.

Suppose, a decision of a court case is about to come, if the decision is your against, you are going to pay some amount as penalty. Perhaps, the decision can be of your favor; you are not sure about it. This is the situation of your contingent liability; the occurrence of your liability depends upon the decision of judge. So till the decision come, you have to recognize it as contingent liability in your books of accounts.

Remember! The word “contingent” means “unpredictable” therefore, the liabilities which we cannot predict whether it is going to be actualized or not. If we can predict, it is no more a contingent liability it will be regarded as a pure liability.

Similarly, Banks give guarantee on the behalf of its customers. So if the customer fails to pay the amount, the bank has to pay. Here banks cannot recognize it as liability as it is not confirmed that customers will not pay the amount so it is a contingent liability for banks because it depends on the future activities of the customers. Banks has to show this contingent liability in the foot notes of its annual report at the end of its accounting year. In the next year, if customers pay all their dues, the bank gets free from its contingent liability but if they fail to pay, bank has to recognize it as liability in the year it is cleared that customer is insolvent.

This was about company, now take it practically. Suppose, your dad promised you to buy an I-phone for you if you get 1^st rank in your upcoming examination.  Now from your father’s point of view, the obligation to give you I-phone depends on your getting 1^st rank in exam. The liability of your father arises only if you got 1^st rank. If you do not get it, there will be no liability so until the results come out it’s a contingent liability for your dad.

It is very important point to be seen carefully in annual report at the time of analyzing a company by investor because this is the point where all the books are cooks by the management of the company.

Last, liabilities are recorded in the balance sheet but contingent liabilities are recorded in the footnotes of the annual report.

Hope now you have understood this concept very well. If any questions regarding this topic, write me in comment box below.

Who are Underwriters?

Underwriters are the commission agents who give guarantee to the public limited company that in case public failed to subscribe its shares; they would purchase the rest of the shares.

Thus, the issuing company gets assured that its shares are not going to under subscribed.

First of all, the word “subscribes” means money given by the public in exchange of shares.

Suppose, XLTD wants to expand its business and intent to raise its capital from public by issuing 10000 equity shares @100 each to public but they have doubt whether shares were fully subscribed by the public or not. In case public does not subscribe its shares fully, the company will fail to get its intended money and its plan will not be implemented. To overcome from this worry, the company appoints underwriters who for a commission, takes all the responsibility of issuing shares and being fully subscribed. Now in this case, if public subscribes only 8000 shares, the rest 2000 shares were purchased by the underwriters. Thus, the company got its 8000*100=800000 plus 2000*100=200000 which makes total 1000000. Ofcourse, the company has to pay commission to the underwriters for this guarantee.

What is Prospectus?

It is a document issued by the public limited company at the time of raising money from public, either as shares or debentures. The thing is that, nobody is going to invest his money in the company without looking at proper records and profit earning ability of that company. That is why, company issued prospectus which says everything about the company like its preceding five year balance sheet, profit and loss statement,  name and address of the company and their directors, qualification of the directors, name and address of the signatories of the memorandum of association and shares held by them, etc and many more important things.

After reading this, if the public are tempted to invest their money they will apply accordingly.

Actually, company act also requires the public limited company to issue its prospectus at the time of raising its capital from public so that the general public gets full information about the company. 

What are preliminary Expenses?

1.       These are the expenses incurred at the time of formation of a company. The following are the expenses:

1.       Expenses relating to drafting and printing documents in relation to the registration of a company.

2.       Stamp duty on authorized capital. Registration fees.

3.       Cost of common seal and preliminary books.

4.       Expenses relating to the drafting, printing and issuing of prospectus.

5.       Commission payable to underwriters of shares etc.

“Security premium account” is used to write off this preliminary expense.  Some companies write it off over the years in profit and loss account. The portion which is yet to be written off will be shown as “miscellaneous expenditure” on the asset side of the Balance Sheet.

Ok! but reader wants to know is it only about company not for partnership business?

The answer is there is no such provision in partnership act regarding preliminary expenses. I think it’s because the preliminary expense of partnership is very minimum in comparison to company.

Is there any accounting standard relating to preliminary expenses?

Yes! AS 26 –intangible assets also deals with preliminary expenses.

If you have any other questions regarding this topic please write me in the comment box below.

Single Entry System of Accounting.

This system of accounting is followed by those who are not trained enough for double entry system although they are engaging in business activities and concern to find out their profits.

First of all, I want to add that the word “single entry” should not be understood as "one entry accounting". It is a combination of double entry, single entry and even no entry.

The main idea behind this concept is to not record expense and income transactions. We only have to compare opening capital with closing capital to determine our profit.

Suppose you started business with cash 100000 rupees in the beginning of the year on 1^st Jan 2014.

And during the year you made some transactions which brought the following balances on 31^st Dec 2014:

Machine—40000 rupees; Stock—20000; debtors – 30000; Bank balance—60000; cash in hand—20000.

Creditors—50000.  Thus the total closing capital balances are – 120000.

Thus, the profit for the year is 120000(-) 100000=20000.

What I have done is just deduct opening capital from closing capital to find out the profit.

This system explains that if you are incurring any expenses, your cash gets reduced so no need to maintain the recording of expenses and income. On the other hand, if you are incurring any expenses on credit your creditor appears on the liability side of the balance sheet. So you have just seen that in every situation your balance sheet value gets affected by the transactions, that is why, the system appeals us to use only balance sheet value in determining profits.

To conclude, I must say that the chances of misappropriation, miscalculation, and fraud increases too much as there is not trial balance to check the error.

That is how I explained single entry system of accounting. If you have any doubt regarding this topic, please write me in the comment box below. 

What is Double Entry System of Accounting?

The most important and backbone of the Accounting is this double entry concept according to which, every transaction has double effect.  Your debit must be equal to credit. If we are purchasing any material on cash, we are debiting purchase a/c and crediting Cash a/c. In the asset side of Balance sheet, the cash gets reduced and stock appears with the same amount. Thus, your balance sheet gets equal.  The idea is at any point of time your assets must be equal to liabilities+ capital.

 Here comes the Equation:   Assets= Liabilities + capital

The concept reduces the mathematical error to greater extent as it allows us to prepare trail balance and we can check easily the effect of transaction in balance sheet. The concept gets preferred over Single Entry System.

Now take an example to see how things get easy under double entry accounting.

You introduce cash Rs 500000 into the business.

                                          Cash (debit) 500000

                                          To capital (credit) 500000

Cash is an item of asset so your asset gets increased and capital on the other hand also gets increased with the same amount and here your balance sheet gets matched. The equation will be:

                                            ASSET= Liabilities + Capital

                                            500000= Liabilities + 500000

Purchasing goods on credit valued 10000:

Here your asset got increased because stocks are coming in for 10000 Rupees and your liabilities also gets increased with the same amount as you have to pay to creditor.

                                           Asset= Liabilities + Capital

                                           510000=10000+500000

In this way the double entry accounting makes our accounting easy.

Hope you like it. If you have any questions regarding this topic, feel free to write me in comment box.

What is Securities Premium Account? and what are its utilizations?

1.   Here “Securities” means shares, debentures, bond etc. Listen! There is a difference between share premium and security premium. If I am saying share premium, it means I’m taking only equity and preference shares and on the other hand, security premium contains bonds and debentures also apart from shares. So security concept is a broad concept than share concept. Now, “Premium” means amount more than the face value of securities. Face value may be of 100, 10, 5, or even 1 Rupees/dollar.

If the company issues the securities more than face value, the excess of the amount over face value will be treated as premium and this premium is a reserve which is shown in balance sheet under the head “Reserve and Surplus” with the name “Security Premium Account” 

Suppose, a limited company with a face value of Rs10 issues 100000shares at a premium of Rs2. The journal entry would be:

Bank a/c      debit 1200000 (money received)

  To Equity Share Capital a/c 1000000(face value)

  To Security Premium a/c 200000(excess of the amount over face value)

The same rule will be applied for debentures and bonds.

But the question is why any company is going to issue its shares in premium?  

The answer is the management of that company believes that his company is doing good business and worth more than its face value. 

Is it profitable for the company? 

Yes! Definitely, the company is getting cash more than its face value so it’s a good sign for the company.

Is it profitable for the company if it issues debentures at a premium?

 Again the answer is Yes, Sure! Because, the company is getting more money than the money it will have to pay at the time of redemption of debentures.

Curious readers never stops to ask questions, their last question is –

What if company redeems its debentures at premium?

 Answer is –loss for the company because that company has to pay more than what it took at the time of issue of debentures. And the amount credited in the security premium account (if any) will be utilized first, to cover up this loss. (see point 4 below)

Now learn some more utilization of security premium account.

Utilization of security premium account-:

Sec 78 of the company act 1956, directs us to utilize the security premium account for the following purposes:

1.       Issuing fully paid bonus shares.

2.       Writing off Preliminary Expenses.

3.       Writing off the expense of or the commission paid or discount allowed on any issue of shares or debentures of the company.

4.       Providing for the premium payable on the redemption of preference shares or debentures of the company.

5.       In purchasing its own shares that is, Buy Back u/s 77A.

This was how I explained the above concept, hope you like it.If you have any question regarding this topic please feel free to ask in below mention comment box. 

What is Capital Reserve? and its utilization?

Capital Reserve is the reserve which is created out of capital profit. It is not ordinarily distributed as dividend to shareholders. The concept is if we generate profit from an extra-ordinary transaction we kept it as capital reserve to safeguard against any capital losses if arise in future.

The following are some examples of capital profits which should be credited to capital reserve:

1.    Profit on repayment of debentures. That is, redeem the debentures at discount.

2.    Profit on revaluation of assets.

3.    Profit earned through forfeiture and re-issue of shares. For detail knowledge of forfeiture please click here

4.    Profit earned prior to incorporation, and

5.    Profit on the acquisition of business etc.

Utilization of Capital Reserves: (The intention is to reduce capital losses)

a)    For issuing bonus shares.

b)    In writing off preliminary expenses.

c)    In writing off commission or expense or discounts etc on shares or debentures.

d)    For providing premium on the redemption of redeemable preference shares or debentures.

This was the short description of capital Reserve. If you have any questions, feel free to write me in the comment box below.

Suggestion for CMA -Financial Accounting (inter) for June 2015

I’m back again to help you prepare for CMA (inter) -Financial Accounting papers if you are appearing in June 2015. Today is 28^th March, and it’s about two months left for the examinations. I’ve prepared the following suggestion just to guide you about the preferences you should give to the chapters while preparing for the Financial Accounting papers. One thing we should keep in mind that in the professional examinations we cannot leave any chapters -we have to go through each and every topic. There is a short cut to just pass the paper but not to get good marks. After all exams are just a formalities our main intention is to learn everything in this stage before moving ahead to learn next. 

Anyway, following are my suggestions which you have to go through first and then others but don’t leave anything.

First start your preparation with Banking and Insurance. (And secure 20 marks)

2. Then Self Balancing and Sectional Balancing system. (And secure 10 marks) 

.

And these are very easy chapters; you can get it just within 1 week preparation.

3. Do Accounting Standards 7 and 9. I,e Construction Accounting and Revenue Recognition.(secure 10 marks again)

4. Then Investments Accounting (as13) and Insurance Claims (secure 10 marks).

Believe me! You can learn these also within 1 week.

Till now all the chapters are quite easy and scoring. With little effort you can secure at least 40 marks (if taking conservatively) with 15 days of preparations.

5. Now time has come for learning Hire purchase system because it is important than Royalty so put the Royalty Accounting for the last.

6. Branch Accounting is again preferred over Departmental. Do first Branch and put Departmental Accounting for the last.

Both Hire purchase and Branch can be done within 7 days. I will not talk about marks now onwards as there is no surety of them to come. It can happen that you prepare both chapters and they don’t come in exam but we are preparing for our studies; we have to learn everything which has good chances of coming in exams and the probability of them is more in compare to other chapters.

7. Do Accounting Standard 2, 4 and 5 thereafter, take Final Account because these three standards will come useful in solving the Final Account problems.

8. Here comes the important part, conversions of partnership firms.

These two chapters can again be done easily within seven days.

9. Then Single Entry and NTO (Income & expenditure and Receipts & payments)

Again seven days will be needed to do these chapters as they are pretty much lengthy.

10.  Now the time has come to do Depreciation Accounting and Accounting Standard 1, 10, 11, 15 and AS 16.

These can be done in 5 days.

Till now you have completed 80% of your syllabus and the total days you have taken is 41. You still have 19 days.  From this, deduct 7 days for revision, so finally you have 12 days to grab few more chapters in your bag.

11. Do Royalty and Departmental Accounting. (In 4 days)

12. Now go for p/l Appro, Admission, Retirement, Death and Dissolution. (IN 4 DAYS)

13. Now finally, Consignment, Bill of exchange and Joint Venture. (In 4 days).

Rest seven days Revision and you can get few more bonus days for revision in case you have already done few chapters mentioned above. And I’m sure somebody has done some chapters so far. 

And please do not leave any chapter just because it came in last term exam-these are misconceptions, anything can come in professional examinations.

This is just the planned study of how to maximize your effort in minimum time.

Hope I have helped you to minimize your stress a bit in exam time. Good luck!